Chancellor George Osborne has ordered an independent investigation into events at the Co-operative Bank as regulators consider launching enforcement action.
Osborne is using his powers under the Financial Services Act 2012 to order an independent investigation into the bank.
The investigation has been jointly agreed with the two regulators – the Prudential Regulation Authority and the FCA – who agree there is a public interest in a statutory investigation.
It will be led by an independent person appointed by the regulators, yet to be decided, with the approval of the Treasury.
Separately, the FCA and PRA have today announced they are both considering whether they should also launch formal enforcement investigations.
The independent investigation will not start until it is clear it will not prejudice any actions the relevant authorities may take, including the potential FCA and PRA enforcement investigations.
The independent inquiry will take into account the FCA and PRA enforcement investigations and be determined in consultation with the independent person appointed to lead it.
It will cover the actions of regulators and Government as well as the Co-op Bank including prudential issues, governance – including the appointment of senior staff – and acquisitions.
The investigation will go back to at least 2008.
The Co-op Bank discovered a £1.5bn black hole in June and it has been forced into a rescue plan. It also pulled out of its bid to buy 632 Lloyds Banking Group branches.
This week, it has come under fire for appointing Reverend Paul Flowers as chairman in March 2010 after he was arrested this morning on suspicion of supplying drugs.
An FCA spokesman says: “The FCA fully agrees that the investigation should be led by an independent person, and looks forward to supporting them in their work. The FCA will make its full resources available to support the investigation.
“The timing of the investigation must not prejudice any other criminal or regulatory proceedings. The FCA is already undertaking work to establish whether it should commence a formal enforcement investigation and expects to reach a conclusion shortly.”